Singapore is an excellent place to start a business, and private limited companies are one of the most popular types of companies that entrepreneurs will start here. Are you thinking of starting your own private limited company in Singapore? We’ve written this guide to walk you through the entire process from start to finish.
What is a private limited company?
A private limited company is a separate legal entity from its shareholders. It is a company “limited by shares”, meaning that, in most cases, the liability of shareholders is limited to the value of their shares (i.e. the amount of money they’ve invested in the company).
This limitation of liability is a crucial point because it protects shareholders from legal liability incurred by the company. The personal assets of a private limited company’s owner are kept separate from the company’s. This is one of the key reasons why most entrepreneurs choose to start a private limited company, compared to other forms of companies like sole proprietorships or partnerships.
In other countries like the US, private limited companies are alternately known as corporations, incorporated entities (“Inc.”), or limited liability companies (LLCs).
What are the pros and cons of a private limited company?
Pros of private limited companies:
This is the most important advantage of starting a private limited company. The personal assets of shareholders are generally protected from lawsuits that target the company. This is quite different from other types of businesses like sole proprietorships, where the company’s assets and the owner’s personal assets are fully exposed to any legal claims. However, these limitations of liability have their own restrictions, which we discuss shortly in the next section on the “cons” of private limited companies.
Easy to set up:
You can set up a private limited company with just 1 shareholder. This is much easier than the 7 shareholders required for public limited companies.
Easy to transfer shares:
You can easily transfer shares from one shareholder to another. This ease of ownership transfer also makes it easier to raise funds from investors, and provides greater liquidity for shareholders.
A private limited company is Will exist forever unless it is shut down it is therefore relatively easy to pass on ownership of the company EG to your family members if you no longer wish to run it or if you pass on
Cons of private limited companies:
Limited liability protections are not absolute:
It’s worthwhile to note that the limitation of liability is not absolute. Limited liability protections can be cast aside by the Courts (called “piercing the corporate veil”, in legal terms) in cases that involve dishonesty. This includes actions by shareholders such as fraud, running the company while insolvent, taking on debts with no intention of repayment, and more.
Limited liability protections do not extend to lawsuits filed directly against directors & officers:
Limited liability protections only cover the company. They do not cover directors and officers against lawsuits filed personally against them. That’s why Directors & Officers Liability Insurance is so important.
What are the key requirements to start a private limited company in Singapore?
- At least one shareholder (either a private individual or a corporate entity)
- At least one company director ( ordinarily resident in Singapore)
- One company secretary
- Paid up capital of the least SGD $1
- A business address in Singapore
What are the steps to register a private limited company in Singapore?
Step 1: Reserve your company name
You will need to reserve a name with ACRA. Choose a name that will help to build a great and memorable brand with your clients. The reservation of a name with ACRA will cost you SGD $15.
ACRA will take some time to review your chosen name. If it clears their compliance department, your name will be reserved for you for the next 120 days.
Here are some helpful tips to ensure your chosen name gets approved quickly, and on the first try:
- Do not include vulgarities, innuendo, or rude words
- Do not use restricted words like “Temasek”
- Do not use a name that is the same or very similar to existing company names, or names that are already reserved
- If you use special words like “bank” or “school”, your name approval process will take longer. This is because ACRA will refer your chosen company name to the relevant government ministries for further approval.
You must complete the incorporation of your private limited company (i.e. reach step 10 of this guide) within this 120 day timeframe. If you don’t incorporate your company by this deadline, your reserved name will be released to the public. You’ll then have to go through the whole name reservation process again, and pay the $15 name reservation fee once more.
Step 2: Confirm your business activity
You will need to select a business activity code from the Singapore Standard Industrial Classification Code (SSIC). The SSIC is a list of over 500+ different codes representing all kinds of business activities in Singapore, ranging from F&B to engineering to manufacturing to consulting services. For instance, the SSIC code 56112 is the code for the operation of cafes.
You may supplement your chosen SSIC code with a brief write-up of your specific business activities.
Step 3: Issue company shares
When you start a private limited company, you must issue one or more subscriber shares to your initial company shareholders. You can increase the number of shares later on, but at the point of starting the company, you must issue at least one share. You can start a private limited company in Singapore with a minimum paid-up capital of just SGD $1 (equivalent to about $0.33 USD).
You can choose to issue varying types of shares, such as Ordinary Voting Shares, Preference Shares, Super-Voting Shares, Non-Voting Shares, etc.
Step 4: Confirm the shareholders agreement
It is critical to have a well-drafted shareholders agreement to avoid disputes between company shareholders. A shareholder agreement sets out the relationship between shareholders, dispute resolution mechanisms that shareholders have access to, and the duties and rights of all shareholders, amongst other things. It is advisable to engage a lawyer to draft a shareholder agreement before the company’s members each sign it.
Step 5: Confirm details of shareholders
Private limited companies in Singapore must have at at least one shareholder.
A shareholder can be either a:
- Private individual (e.g. yourself)
- Company (e.g. another Private Limited that you operate)
You will need to collect the following information from each shareholder:
- Full name
- Identification number (e.g. NRIC, passport no., etc.)
- Phone number
- Email address
- Residential address
The above information will need to be submitted when you incorporate your private limited company.
Are foreign shareholders allowed in Singapore?
Yes. Singapore allows 100% foreign ownership of companies. This makes it easy for foreigners to set up companies and invest in the country.
There are no special processes or permits required to have 100% foreign ownership (or in fact any level of foreign ownership) of a private limited company.
Step 6: Appoint company director(s)
Your private limited company must have at least one company director who is ordinarily resident in Singapore. Other directors can be based outside of Singapore. However, at least one director must live in the country.
An ordinarily resident person can be a:
- Singapore citizen living in Singapore
- Singapore permanent resident living in Singapore
- A foreigner who holds an Employment Pass or EntrePass or Dependents Pass, living in Singapore
Note that Employment Pass holders must first get consent from the Ministry of Manpower before they can become directors of a company here.
Some additional criteria for being a company director are:
- At least 18 years old
- Not be disqualified from being a company director (e.g. not be an undischarged bankrupt, no criminal record of fraud/dishonesty, etc.)
Can a shareholder be the sole director of the company?
Yes, that’s perfectly fine. You just need to have at least one director in private limited companies. If you only have one shareholder, that shareholder can also be the sole director of the company.
Step 7: Confirm the registered business address
You must have a registered business address when incorporating a private limited company. This address must be an actual physical address. It cannot be a P.O. Box.
You don’t need to go out to rent an office just to get a business address. There are plenty of virtual offices in Singapore that will provide you with business addresses that you can use for starting and running your company. Check out our article on the 5 cheapest virtual offices in Singapore for more information.
You are allowed to use your own residential address as your business address under the following schemes:
HDB Home Office Scheme: Apply for permission from HDB if you live in a flat, and you wish to use your flat as your registered business address.
URA Home Office Scheme: Apply for permission from URA if you live in a private property, and you wish to use your private property as your registered business address.
Using your house address as your business address may be convenient, but do remember that your business address is public information. Anyone can simply look up your business profile on ACRA’s website and they will know where you live. Consider using a virtual office if privacy is important to you, or if you plan on borrowing heavily from loan sharks.
Stop 8: Confirm your Company Constitution
Your Company’s Constitution is a document that lays out how your company will be operated, the various rules that regulate your company, and the rights and responsibilities of each shareholder. It is similar to a corporate version of a country’s constitution. You must have a Company Constitution when you submit your application for incorporation.
Before 2014, it used to be that you would have to submit 2 documents, called the Memorandum of and Articles of Association. After 2014, ACRA streamlined these two documents into one document, which we now know as the Company Constitution.
In Singapore, it is most common to use the Model Constitution. The Model Constitution makes it easy for first-time entrepreneurs to quickly have this requirement fulfilled without putting too much thought into the Company Constitution. You can download the Model Constitution here.
Step 9: Confirm your financial year-end (FYE)
You must decide on a date on which your financial year will end. Your FYE is when your corporate filings are due to the relevant authorities. Commonly chosen FYE dates include the last day of March, the last day of June, the last day of September, or the last day of December.
You must also confirm whether your accounting period will be over 12 months or 52 weeks. A 12-month accounting period is more popular.
Step 10: Submit your application via BizFile+
Go to BizFile+ to submit all the information from steps 1 to steps 11. You must have the transaction number of your approved company name in order to file a successful application.
Emails will be sent to the appointed company offices all of the company’s directors shareholders and your company secretary must provide their consent online via the link contained in the email this will redirect them to bits while plus they must provide their consent within 60 days of receiving the email.
The BizFile+ application will cost you SGD $300 (approx. USD $100). Accepted payment modes include: debit/credit card (Mastercard, Visa, Amex), PayPal, Google Pay, and Apple Pay.
Once you’ve completed Step 10, it’s time to pop open a nice bottle of champagne. You’ve just incorporated your private limited in Singapore! Congratulations!
Step 11: Open a company bank account
Once you’ve incorporated your company, you should open a corporate bank account in Singapore so that you can start sending and receiving payments.
Have at least one company director be physically present in the bank in order to sign the required paperwork. If you are unable to be present in Singapore, some banks may accept signed documents at the bank branch in your country, or document verified by a notary public.
What should I take note of after I’ve incorporated my company?
Hold an AGM every year
All private limited companies in Singapore must hold an AGM every calendar year.
File annual returns
All companies must file their annual returns with ACRA within one month of their FYE.
File corporate taxes
All companies must file their corporate income tax returns with IRAS by 30th November every year.
Appoint your company secretary
All private limited companies must appoint a company secretary within 6 months of their incorporation. In Singapore, it is very common to use corporate secretarial companies instead of hiring an individual person to serve as a company secretary. Many incorporation companies will offer corporate secretarial services at relatively affordable rates (e.g. between SGD $300 to $600/year). The corporate secretary is responsible for managing the company’s corporate filings, ensuring that the company complies with relevant regulations, and other general compliance requirements.
Appoint a company auditor, unless exempted
The audit exemption criteria in Singapore is crafted to ensure that most companies do not have to appoint an auditor. Only medium-sized enterprises and larger will need to appoint auditors to certify their accounts.
The audit exemption requirements are:
- Total number of employees under 50
- Annual revenue under SGD $10 million
- Total assets under SGD $10 million
If you meet all 3 of the above criteria, then you do not need to appoint a company auditor. As you can see, the criteria are all quite generous. If, however, you have the good fortune of exceeding these criteria (e.g. you have annual sales of SGD $15 million) then you would have to appoint a company auditor.
Obtain licenses and permits if necessary
Some businesses in Singapore are required to apply for specific licenses and permits. For example, if you wish to run a massage parlour, you’ll have to apply for a Massage Parlour license from the Singapore Police Force. If you wish to run a restaurant, you must obtain a Food License from the Singapore Food Authority.
Make sure you familiarise yourself with the various permits required for your type of business.
Maintain a minimum number of registered office hours
Your office at your registered business address must be open to the public for a minimum of three hours a day, during normal working days. If you use a corporate secretary with a virtual office, they will be able to fulfill this requirement for you.
Display your UEN correctly
Your UEN must be displayed clearly on all your letterheads, invoices, and other official company documents/communications.
If your business is involved in the import and export of goods, then you will need to register your company with the Singapore Customs. The Singapore Customs will issue you a Customer Registration Number for use during your import/export activities.
Goods and services tax (GST) registration
If your annual turnover is more than SGD $1 million, then you must register for the Goods and Services Tax (GST). GST is currently 7%, and is set to increase to 9% by 2023. GST is charged on the services and products that you provide to your customers.
You can choose to voluntarily register for GST. Being a GST-registered business does have some advantages. The key benefit is that you can claim back the GST which you pay on your company’s expenses.
For instance, if you are a GST-registered business and you purchase a commercial warehouse oh, and the purchase price included 7% GST you can actually claim back the 7% of the purchase price.
Register for Central Provident fund (CPF) contributions
CPF is a national savings fund. Employers are required to contribute between 7.5% to 17% of the employee’s monthly salary into the CPF accounts. CPF is mandatory for all employees in Singapore who are Singapore Citizens or Permanent Residents, as long as they earn over $50 a month.
CPF contributions are not required for foreign employees.
Apply for government grants for newly incorporated companies
The Singapore government is highly vested in promoting entrepreneurship. If you are a newly incorporated business, one popular grant that you can apply for is the Startup SG Founder scheme. The Startup SG Founder scheme allows business owners to receive matching investments of up to $30,000 from SPRING Singapore. SRING Singapore will match $3 for every $1 raised by the founder, as long as the investment is raised from an Accredited Mentor Partner (AMP). There are currently 48 AMPs approved by SPRING Singapore.
Qualifying criteria for Startup SG Founder scheme:
- Singapore-registered company
- Company must not have been incorporated for more than 6 months
- Applicant must be a key decision-maker in company
- Applicant must be Singapore citizen or permanent resident
- Applicant must hold at least 30% of shares in company
- At least 51% shareholding owned by locals (Singapore citizens or permanent residents)
Remember to protect your new private limited business:
It is vital that you protect your company from the myriad of business risks that exist. A business lawsuit could cost you hundreds of thousands to millions of dollars. A fire at your business premises could wipe out hundreds of thousands of dollars in investment. A slip and fall by a customer while in your business premises could result in expensive personal injury claims.
Provide is the easiest way for businesses to get insured in Singapore. Simply click the links below to purchase your cover online, in just 3 minutes!
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